Middle East and North Africa Concentrating Solar Power Knowledge and Innovation Program

Why India’s concentrating solar heat market is booming

29th August 2018

India’s subsidy program for Concentrating Solar Heat (CSH) has led to a significant increase in installations across the industrial and commercial sectors, paving the way towards commercialization and driving down the technology’s levelized cost of heat.

The incentives were introduced by Ministry of New & Renewable Energy (MNRE) and further reinforced through a joint project by the MNRE, UN Development Programme and Global Environment Facility.

In just five years (2012–2017), the off-grid scheme had spurred the installation of 71 CSH projects over 45,500 m². Moreover, 34 CSH technology suppliers are now approved as MNRE-channel partners.

“India is on its way to a capacity of at least 20 GWth of CSH over the next 10 to 15 years. This would be split between the manufacturing industry, and the oil and gas, such as enhanced oil recovery and oil refineries. The possibility of adding CSH to existing coal-based power is also enormous because India boasts a large coal-power plant capacity,” says Siddharth Malik, managing director of Megawatt Solutions.

The New Delhi-based company, which focuses on the industrial sector and is an MNRE-channel partner, has installed 30 CSH systems across India, amounting to nearly 5 MWth in capacity, specifically having delivered CSH intervention for waste water evaporation and sludge drying.

“We have worked extensively in the dairy industry, where a lot of heat is used in applications such as pasteurization, boiler feed water heating, and Cleaning-in-Place processes. We’ve also worked with the pharmaceutical industry, which requires heat for vacuum distillations at 140-160 ºC, mostly generated with liquid fuels today,” says Malik.

CSH could also be used in the food industry where drying/dehydration and evaporation is used in large-scale operations. Additionally, the automobile sector represents several opportunities, given the large amount of heat used for de-greasing and cleaning applications. One could also move forward in the rubber industry, where CSH could provide heat for processing rubber at more than 200 ºC.

“There are certain opportunities that are common to all industries. One is pressurized feed water heating at more than 140 ºC to reduce medium pressure steam in process boiler circuits, and the other is industrial wastewater evaporation, something we’re pioneering by CSH,” explains Malik.

Overall, industrial heat processes requiring more than 150 ºC in India account for up to 30% of total energy consumption, expected to be 1,200 MTOe by 2030, according to an IEA report, a staggering number that reflects the huge potential for CSH.

Indian industries are split between fuels, from diesel, furnace oil and natural gas – used mostly in sensitive industries like food and beverage (F&B) and pharmaceuticals – to cheap solid fuels such as wood, coal and biomass, largely used in the textiles, leather, pulp and paper industries.

The former category is more expensive and higher in calorific value and thus creates a better business case for solar thermal to displace those fuels.

Diesel in India costs about USD 89 dollars/MWh compared to USD 8-12/MWh levelized cost of solar heat for CSH. Coal and wood fuel costs up to USD 25/MWh, so CSH has a business case against them as well.

Another market driver is the financial support granted by the government. In February 2018, MNRE pledged to continue its subsidy program for CSH systems, with a target of installing 90,000 m2 of collector area by March 2020.

The subsidy offered is up to 30% of the benchmark or actual investment cost, whichever is lower, and will be reduced to 20% in the last year of the program. For non-profit bodies in special-category states, developers will receive 60%, and 40% in the last year.

“India is a policy driven [concentrating solar thermal] market with a lot of support from international organizations. Up to one-third of the investment cost may be subsidized by the state,” says Bärbel Epp, managing director at Solrico, a research agency focusing on the solar heating and cooling sector.

Perhaps the biggest advantage is the availability of local CSH system components. Apart from solar mirrors, which account for up to 25% of total cost, the balance of the complete system can be sourced locally.

“If you come with European technology to India or Mexico, you won’t reach the same payback because they use rather cost-effective systems,” says Epp, adding that these two countries have the largest number of solar thermal plants in industrial processes in the world.

Considering the market’s maturity, investments in CSH systems in India have a payback time of up to four years when displacing liquid fuels, gas and electricity, and up to six years when displacing solid fuels like wood, biomass and coal, according to Malik.

“The time is right for solar thermal and it has found its path to disrupting the industrial sector,” he asserts. “The addressable potential is very large – in the hundreds of gigawatts.”

The Middle East and North Africa Concentrating Solar Power Knowledge and Innovation Program aims to accelerate CSP investments in the region by addressing knowledge and awareness gaps, linking projects with sources of finance and technical advice, and promoting innovation. This three-year program was launched in late 2016 by the World Bank with support from the Climate Investment Funds (CIF).

The Center for Mediterranean Integration (CMI) is a multi-partner platform where development agencies, Governments, local authorities and civil society from around the Mediterranean convene in order to exchange knowledge, discuss public policies, and identify the solutions needed to address key challenges facing the Mediterranean region.

About CIF

Since 2008, the Climate Investment Funds (CIF) has built a portfolio of over 300 investments in 72 developing and middle-income countries to scale up renewable energy and clean technologies, mainstream climate resilience in development plans and action, and support the sustainable management of forests. Although most programs and projects are still in the early stages of implementation, our funding has already contributed to over 3 gigawatts of new renewable energy capacity and close to 3 million people are already benefiting from CIF-supported climate resilience measures. Our experience shows that with strong leadership, the right technical and financial support, and inclusive partnerships, difficult investment decisions can be made with tangible results.